3 hours Ago By Jonathan Prynn
The government was forced to borrow more last month than in any December on record outside the emergencies of the financial crisis and the pandemic, latest official figures show today. Borrowing in the month more than doubled from the previous year to £17.8 billion, far beyond City forecasts and well above the £14.
6 billion projected by the Office for Budget Responsibility in the October budget . This was the third-highest December borrowing since monthly records began in January 1993, behind only those of 2009, when it was £21.4 billion, and the £24.
2 billion of December 2020. The size of the borrowing will add to jitters in the bond markets about the size of Britain’s national debt mountain and increase fears that Chancellor Rachel Reeves will have to cut public spending again to bring the public finances under control. The Government’s borrowing needs were swelled by a huge increase in interest payments on existing Government debt.
This rose to £8.3 billon largely because of higher than expected inflation , which means the Government has to pay out more to investors holding index linked gilts . Other factors included a £2.
9 billion rise in departmental services “as pay rises and inflation increased running costs” and a £2.2 billion hike in the benefit bill “ largely caused by inflation-linked increases in many benefits Borrowing in the financial year to December 2024 was £129.9 billion; this was £8.
9 billion more than at the same point in the last financial year and the second-highest financial year-to-December borrowing since monthly records began in January 1993. Chief Secretary to the Treasury Darren Jones said:“Economic stability is vital for our number one mission of delivering growth, that’s why our fiscal rules are non-negotiable and why we will have an iron grip on the public finances. “Through our spending review we will interrogate every line of government spending for the first time in 17 years.
We’ll root out waste to ensure every penny of taxpayer's money is spent productively and helps deliver our Plan for Change.” Joe Nellis economic adviser at accountancy firm MHA, said: “ Increased borrowing, combined with the recent rising cost of borrowing, has put more intense strain on central government expenditure. “While the bond market has calmed in the last week and fears of an emergency mini-budget have subsided, the Chancellor will be very aware of the dissipation of government finances as we head towards the OBR’s Economic and Fiscal Forecast scheduled for 26 March.
” Alison Ring, ICAEW Director of Public Sector and Taxation, said: “The £6 billion repurchase of Ministry of Defence housing has pushed up the deficit this month by £2bn, but this will benefit the public finances in the long term. “The real test will come next month, when self assessment receipts come in. Depending on how these affect the OBR’s updated projections in the Spring Forecast, the Chancellor may find it difficult to hold the line on not making any major tax or spending decisions until the Autumn Budget later this year as she attempts to balance the books.
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